Saturday, March 8, 2008

Does your financial plan rocks?

“We … are in a Business, where there is no competition “
“We have the most innovative product and processes, however we are still to work on the financial aspect of it “

These are the exact terms, which makes any investor walks out from the room. What do you mean , you don’t have competition ?

It automatically says, that market is not a right place to do business .
if competitors are not there, how can be a market right place to do business ?
And if there is a lack of general attractiveness, of that market .
How do you expect the investor to spend money on a market ?
2 starting statements can make investor feel, that the entrepreneur is from other world, or he is having a ego-trip.
Let us explore how a investor thinks (whoever he is – an HNI,PE,VC) ?

1. Is this a opportunity ?

First he tries to understand whether, what the entrepreneur is telling as an opportunity is really a opportunity?
This process is tedious. He sees the Business plan. He sees the people. He sees the figures and their consistency.
The myth …. “The bigger the figure , higher is the interest “.
Reality … “ More consistent the figure , higher is the interest “.

2. What is the value of it ?

Next important thing , is the valuation. It is where, the investor tries to find out the present value of the organization, and what would be the future value of that same organization, keeping all the factors stable.

3. What is the risk associated with enchasing the future value ?

These is where, the investors tries to estimate, that what are the factors, which could negatively effect on the future value of the organization.

4. Due Diligence

Now, the investors starts finding out that how reliable are the people behind it, and what are there past records. Because, past records would say a lot of things about how the business would be executed over a point of time, which the Business plan might not say.

5. Legal agreement and deal signing

This is where the legal context is set up, and the entire process of interaction between the investor and entrepreneur is legalized which ends into deal signing.

The financial plan has to accurately take care of all this aspect , that it would have , necessary strength to handle all this phases.

A financial plan is the vitality of business plan . Without it , the business plan would look like an ego trip of an entrepreneur .

So ..

Does your financial plan rocks?

Allindialive gives specialized business planning consulting service by expert business planning consultant through where your financial plan will definitely rock with your business plan .

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